The spot price of refined copper is $3.4460 per lb., and the futures price of the NYMEX February copper futures contract is $3.4500 per lb. Assume that today is in December. So this contract expires in 2 months. The continuously compounded 2-month risk-free rate is 0.50% per year. The storage cost is $0.05 per lb. for 2 months, payable in advance. Contract size is 25,000 pounds.

Is there an arbitrage opportunity? If so, what is the arbitrage strategy? (Assume that the strategy is designed so that net cash flows today are zero.) In your analysis, treat copper as a true consumption commodity.

Group of answer choices

Take a short position in February copper futures, buy copper in the spot market today, arrange to pay storage costs, and borrow at the risk-free rate until February.

Take a long position in February copper futures, buy copper in the spot market today, arrange to pay storage costs, and borrow at the risk-free rate until February.

Take a long position in February copper futures, sell copper short in the spot market today, save on storage costs, and invest sales proceeds at the risk-free rate until February.

Take a short position in February copper futures, sell copper short in the spot market today, save on storage costs, and invest sales proceeds at the risk-free rate until February.

No arbitrage opportunity exists.